Boston start-up fighting back against patent trolls

It’s not tough to argue that patent trolls are bad for big business — at the very least, attorneys general from Vermont, Massachusetts and Nebraska agree with the sentiment. But often underreported is the effect of non-practicing entities on start-ups and up-and-coming businesses. One growing mobile payments firm, however, is fighting back.

Boston-based mobile payments firm LevelUp says it is in the middle of three separate patent infringement lawsuits brought by patent trolls. As a result, company founder Seth Priebatsch says, LevelUp has been forced to allocate hundreds of thousands of dollars to legal fees instead of, say, hiring more employees. He claims more attention needs to be paid to these types of patent trolls, both from government sources as well as growing companies and venture capitalists themselves.

In early November, Priebatsch and Massachusetts Attorney General Martha Coakley cohosted an event to bring the patent troll issue to light. In a statement, Priebatsch told the Boston Business Journal, “LevelUp estimates that we would have hired 10 additional people if not for the expenses associated with our patent troll litigation. The bottom line is that while patents used appropriately to foster innovation are clearly good, patent trolling has become a disturbing and expensive trend that's harming innovation in Massachusetts.”

That numbers say this type of accusation is common for new businesses. According to a recent National Venture Capital Association study (PDF), over one-third of start-up companies have faced patent assertion litigation. In addition, over 70 percent of venture capitalists surveyed claimed to have faced IP-related pressure. Of these suits, respondents pegged the IT as the industry sector in which start-ups are hardest hit, followed by life sciences and clean tech.

However, the tide may be changing. With new Congressional legislation set to be introduced that could transition the U.S. to a “loser pays” system in a patent suit, some of the pressure could be taken off start-ups moving forward. If Priebatsch, Coakley and others have their way, the looming threat of patent trolls will be a relic of the past.

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